Two years after Euromaidan, Ukraine is faction-ridden and the economy is wilting

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To the chagrin of the EU's governing elite, a 'ballot box rebellion' in a single state again threatens to derail a major initiative years in the making. On Wednesday, a referendum in the Netherlands asked whether the government should ratify the European Union's March 2014 Association Agreement with Ukraine: 61.1% of those that voted, said 'no'.

Ukrainian lawmakers rumble during a debate at a session of parliament in Kiev, Ukraine 17 March, 2016

The result is non-binding. Yet at 32%, turnout crossed the threshold requiring the Liberal-Labour coalition government of Prime Minister Mark Rutte, which strongly supports the Ukraine agreement, to 'consider' it. Eurosceptic groups across the EU have hailed it as a major victory.

The stakes are high. The Netherlands is alone among the EU's 28 members in not having ratified the new agreement. In January, EU Commission President Jean-Claude Juncker warned that 'Russia would pluck the fruits of an easy victory'.

For Ukraine, yesterday's 'no' makes a 'European' future look even more distant. Two years after the Euromaidan, politics are faction-ridden, corruption and graft are rife and the economy is wilting.

Relations between President Petro Poroshenko and Prime Minister Arseniy Yatsenyuk reached a new low in February when Yatsenyuk survived a no confidence motion moved by Poroshenko's party. A leading, pro-Western figure against former Ukrainian President Viktor Yanukovych in early 2014, Yatsenyuk's approval rating has since fallen to single digits, as his party, the second largest in the Rada, has become mired in corruption allegations. Among those touted as a possible successor is US-born Natalie Jaresko, a former investment banker.

Also destabilising has been the resignation of the economics minister, a Lithuanian national, who accused members of Poroshenko's party, including a leading presidential aide, of corrupt appointments and blocking the transparency measures he had been drafted from abroad to implement. A Slovak has been named as probable replacement.

The many foreigners appointed to high office is a feature of post-Maidan Ukraine. Adding to those mentioned, Mikheil Saakashvili, former firebrand president of Georgia whose order to attack Russian army positions in South Ossetia sparked the Russo-Georgian War of 2008, was last year appointed governor of Russian-speaking Odessa – provocatively given local tensions with Kiev.

The policy is meant to circumvent local patronage networks, but plays to Russian claims that the Euromaidan was a Western-orchestrated coup. Infamously at the height of anti-Yanukovych protests, US Assistant Secretary of State Victoria Nuland was caught considering the merits of various leadership candidates with the US Ambassador in Kiev. That 'Yats' (as Nuland warmly called him) could be replaced by a former US citizen implies, if nothing else, a host of unwanted associations.

But the bigger worry is graft. Corruption concerns and dissatisfaction with Ukraine's lack of progress on tax reform, privatisation and spending cuts have led the IMF to threaten to withhold US$17.5 billion in loan disbursements.

That not a single office holder in Yanukovych's Government has been prosecuted for corruption since the 2014 revolution is often laid, uncomfortably, at the door of the former chief prosecutor, a Poroshenko appointee. In Kiev last year it earned Ukrainian lawmakers a scolding from US Vice President Joe Biden. Yet, when The New York Times ran an editorial urging Poroshenko to do more to stamp out 'Ukraine's unyielding corruption', the Ukrainian President accused it of waging a 'hybrid war' on behalf of the Kremlin.

Ukraine's sixth-richest man (with an estimated fortune of US$700 million), Poroshenko's own probity has also come under a cloud. Named in the Panama Papers, he seems to have used a British Virgin Islands trust company to divest himself, temporarily, of his business interests, though no wrongdoing has yet been established.

Meanwhile, Ukraine's economy has been in free fall. As Nicolai Petro pointed out recently in The Guardian, in 2015 inflation rose 43%, living standards fell by half and the hryvnia lost two thirds of its value. In January, Ukrainian aircraft manufacturer Antonov went into liquidation. Production at the Yuzhmash rocket factory has been reduced to a single day a week.

Collapse in industrial output partly reflects the war in the Donbas. But more significant is the lost Russian investment, markets and indirect subsidies, above all discounted gas. To a far greater degree than many in the West supposed, even after independence Ukraine and Russia remain a single economic space.

Now that that space has fractured, the Western loans Kiev has fallen back on are a mixed blessing. The problem, as Petro notes, is that 'Ukraine will be repaying this debt until 2041, with future generations giving western creditors 40% of the value of any GDP growth over 4%, should it ever reach that level.' Remittances from the seven million Ukrainians working abroad, mostly in Russia, are a crucial lifeline.

Language and identity issues also remain bitterly contested. A month ago, the Rada banned the showing of Russian films produced after 1 January 2014. In a country where 90% of the population can speak or understand it, the use of Russian as an official language alongside Ukrainian remains forbidden, antagonising Russian-speaking cities such as Odessa and Kharkov.

'Ukrainianisation' has alienated the more Russified south and east in other ways too. Though Soviet times are often remembered there with nostalgia, new laws make it a crime punishable by up to five years in prison to display Soviet symbols or deny the 'criminal character of the Communist totalitarian regime of 1917-1991'. Hundreds of Soviet monuments have fallen, including last month the last large-scale statue of Lenin in a major Ukrainian city. Yet the same laws glorify the wartime Ukrainian nationalist organisations that cooperated in the Nazi extermination of Jews, even as they make pointing this out a crime.

The bias mirrors Kiev's failure to tame modern Ukraine's far right. Neo-fascist paramilitaries played a decisive role in overthrowing Yanukovych and have supported the government offensive in the Donbas. Yet on at least two occasions last year, they turned their weapons on the government. Attacks last month by far right extremists on a LBGT festival in Lviv, a city often trumpeted as Ukraine's most 'European', reveal a lack of consensus about the values in whose name the Maidan uprising took place.

As Richard Sakwa observes in Frontline Ukraine, what we call 'the Ukraine Crisis' is in fact two crises that feed off each other. Though optimism is growing that the 2015 Minsk II agreements provide a basis for resolving the rebellion in eastern Ukraine's Donbas region, ceasefire breaches continue. Indeed, the resolution of the broader geopolitical confrontation held out in Minsk will be frustrated so long as what Sakwa calls the primary, 'internal crisis of Ukrainian statehood' goes unresolved – politically, economically and culturally.

Where does this, and yesterday's referendum, leave the EU?

Implied in EU rhetoric of a 'European future' has always been the possibility of an escape from a backward Russian past. Two years on from the 'Maidan', however, it's plain Brussels underestimated the difficulty of importing Euro-style governance norms into a post-Soviet republic the size of Ukraine, with its internecine squabbles and backroom deals.

If the EU erred, it did so above all by allowing itself to be drawn into a zero-sum competition with Russia for influence in Eastern Europe. It failed to examine soberly the cost to Ukraine, in economics and identity politics, of what many Ukrainians perceived as an invitation to loosen, if not severe, centuries of interlocking ties with Russia, as well as the EU's ability to shoulder some of it.

Economically, Ukraine's prosperity will depend not just on exporting raw materials and agricultural goods to Western Europe, but on restoring the Russian investment, trade and supply chains that have supported Ukrainian industry.

Culturally, too, rather than further unpicking an anti-Russian identity from the skeins of historical Orthodoxy (both states rightly find a womb in medieval Kievan Rus'), language (Ukraine's greatest writers, Gogol and Bulgakov wrote in Russian) and wartime valour (Kiev, Odessa and Sevastopol were Soviet 'Hero Cities' on a par with Moscow and Leningrad) that have bound Russians and Ukrainians, ways must be found to weave some of them back together.

In a different world, the shock of a Dutch 'No' vote could deliver the impetus for Brussels to reassess its approach to Ukraine, including by re-examining how far Russia should — must — be seen as part of the solution to, rather than merely the source of, Ukraine's problems.

That's unlikely. The EU will find a way to forge ahead with Ukraine's association agreement just as it did a decade ago when French and Dutch referendums sank plans for a European Constitution. The easiest way to do so will be pointing to the poll's low turnout.

For two years, Russia — and Russians — have borne the economic sanctions levied on its bid to keep Ukraine, as far as possible, in Moscow's orbit. But what ultimately does it say of Europe's commitment to Ukraine if some 68% of voters in a founding member state fail to find the matter pressing enough to bother to cast a vote?